The pay-TV giant BSkyB has launched its own cut-price movies-on-demand internet service, called Now TV, in an attempt to challenge digital upstarts NetFlix, Amazon's LoveFilm and Tesco's Blinkbox.

Sky aims to woo consumers who do not want to pay upwards of £38 a month for a Sky TV package that includes premium channels such as Sky Movies. Now TV will initially offer more than 1,000 movies from studios such as Disney – whose latest animation Brave, pictured, is out now – and Warner Bros on a "pay and play" basis.

Consumers do not have to subscribe and can pay from 99p for old titles to £3.49 for new blockbusters, which they can watch online, on internet-connected TV sets, mobile devices such as iPad and games consoles such as Microsoft Xbox. Consumers can pay £15 a month for an all-you-can-watch movie package. The pay-TV giant promised Now TV will soon offer on-demand sport from Sky Sports and drama and comedy from Sky Atlantic and Sky1.

Analysts say Sky fears NetFlix and LoveFilm, which only cost £5-£6 a month, could undermine its 10.3 million pay-TV subscriber base and Now TV is a defensive move.